Pitfalls to Avoid:During Year End Planning and Preparation

Presented By: Sharon Rahban C.P.A. BIO:

Sharon Rahban, a native of Los Angeles, California, obtained her CPA license from the State of California in January of 2006. Included in her studies as a double major from the University of California at Berkeley, in the fields of Applied Mathematics, and Economics, Sharon also excelled in the fields of Financial Accounting and Auditing. After graduating from the University of California, Sharon began her career in public accounting and went onto become a Senior Auditor at the firm of Macias, Gini, and O'Connell whose clients ranged from Public Sector, Non-profit, Private, and Publicly Traded firms. Sharon's knowledge and experience propelled her to then focus her efforts in public service at the prestigious municipality of the City of Beverly Hills, CA.

For the next eight and a half years, Sharon shined as the Accounting Manager for the City of Beverly Hills, winning annual awards for Excellence in Financial Reporting, as well as creating value for the organization on a continuous basis. In 2012 Sharon was a guest lecturer at the Governmental Finance Officers Association annual conference in Chicago, Il. Sharon is a current member of the AICPA, California Society of CPAs, Governmental Finance Officers Association, California Society of Municipal Finance Officers, and the Cal Alumni Association.

Visit www.rahbancpa.com

TRUE STORY: THE PERFECT STORM AT YEAR-END How to handle?

Priority #1: Search for as much help as possible

Priority #2: Planning, Strategy, and Frequent Monitoring

WHEN TO START PLANNING Start planning during the fiscal year Planning will pick up speed during the last

three months of the fiscal year After the last day of your fiscal year, you

will start executing that plan

KEEPING YOUR HEAD ABOVE WATER

KEEPING YOUR HEAD ABOVE WATER: Do you have enough resources / do you have enough

people? If not, here are some ways to get some:

Advertise for an internship position during the year at High Schools and Colleges

Draw in your HR department to help you, but give them plenty of time Can your Budget division help during year end closing season? Are there staff in any of the Receivables, Cashiering, Accounts

Payable, Purchasing, or other departments who want to work overtime?

If you will be receiving extra help, then leave time for training and then subsequent review of work

Are there tasks that you are currently doing that are not urgent or which you or your staff are doing as a “favor” for other departments? Maybe it’s time for you to call in a favor? Maybe those tasks can wait during year-end closing time?

Can you barter help from other departments/divisions? If they can send staff to help you with year end closing, then you maybe able to send them staff to help during other times of the year.

KEEPING YOUR HEAD ABOVE WATER (cont.) What if your Accounting Division needs to

partially shut down services to other departments temporarily during year-end closing?

How do you schedule this and how do you properly alert departmental staff?

I will provide a sample letter.

KEEPING YOUR HEAD ABOVE WATER (cont.) OTHER CONSIDERATIONS:

Make sure your IT department is backing up your network, daily! Including the accounting system! Make sure you are saving your work at regular intervals.

Make sure staff are not saving documents to their personal or C drives. They should keep all of their work in a central location and clearly titled in case someone is needed to take over their work, or to simply review their work.

Use templates from prior years to help with each of the financial projects that are coming up? If not, then I would suggest using this coming year-end to set up those templates for future years.

I also suggest keeping a list of year-end tasks, schedules, communication templates, in a central location, and then adding to those items when problems come up, so you can plan ahead for future years.

HAVE IN FRONT OF YOU:

WHEN PLANNING, HAVE IN FRONT OF YOU:

The auditor’s request list- you should start assigning pieces to staff as soon as possible

Your prior year CAFR and listing of regular CAFR worksheets- Assign accounts that need closing and footnote disclosure preparation to staff

Prior year State Controller’s Report- start assigning different schedules to staff as soon as possible

Schedule of due dates for finance/accounting projects and reports; Grant monitoring visits and audits; Put these due dates on your calendar and share with staff

Communication templates ready to modify/send to: Other divisions within your department Other Departmental staff CFO/City Manager/Department Heads

POSSIBLE USEFUL TOOLS: List of Assigned Funds

FundNo. Fund Title

Gene

ral F

und

100 General Fund PS

102 Refundable Deposits GV

105 PARS-Early Retirement Plan PS

110 General Fund Public Safety PS

112 State Supplemental Law Enf PS

120 Pavilion PS

130 Benefit Reserve Fund PS

132 Capital Maint. Reserve Fun PS

134 Economic Contingency Fund PS

136 Unforecasted Reserve Fund PS

USEFUL TOOLS (cont’d) List of Assigned CAFR Footnotes

Reporting Area Responsibility Assigned ReviewerCAFR

Cover Manager Supervising AcctTransmittal Manager DirectorMD&A Accountant-1 Manager

Note 1- Summary Significant Accounting Practices Manager DirectorNote 2- Budgets and Budgetary Accounting Supervising Acct ManagerNote 3- Cash and Investments Accountant-2 Supervising AcctNote 4- Interfund Transactions Supervising Acct Accountant-1

OtherGANN Accountant-2 Accountant-1JPA Accountant-2 ManagerTDA Accountant-1 ManagerSingle Audit Accountant-1 ManagerMemo on Internal Control Manager Director

USEFUL TOOLS (cont’d) List of Annual Due Dates

Staff Target Assignment Work Period Completion

Transaction Cycle Cut-offsCash receipts DY 8/31/2018Accounts receivable subsidiary ledger DY 8/31/2018Encumbrances/Purchase orders DW 8/31/2018System accounts payable subsidiary ledger JV 8/10/2018

Centralized AccountsCash

Bank and investment reconciliations JP 7/31/2018Fiscal agent reconciliations JP 7/31/2018Compile interest receivable JP 7/31/2018Interest apportionment JP 7/31/2018Compile lead schedule JP 7/31/2018

Task

Year-end Work PlanJune 30, 2018

Timeline

USEFUL TOOLS (cont’d) Timeline for Completing all reports and PBC

itemsWEEK ENDING

07/06/18 07/13/18 07/20/18Accountant -1 Disposal Accrual and Review Compensated Absences Payroll Accrual Recon

Actuarial Data CCRS & OPEBCost Recovery Posting Q4 Grant Invoicing and Clean up

Supervising AcctTrustee Recons

Bank Recons/Interest Allocation and Accruals

SUGGESTED STRATEGY

This will depend on a combination of staff availability, skill level, resources available, Finance software capabilities, and organizational expectations.

SUGGESTED STRATEGY MAXIMIZING TIMING OF DELIVERABLES:1. Start Doing these During the Fiscal Year:

During the year, when you come across transactions that you know will affect year-end closing journal entries or report preparation, keep documentation in a separate file to refer back to at year-end; If you don’t know how to record a particular transaction, then contact your CPA.

Review GASB pronouncements to determine which are applicable to your organization, then plan for data gathering, and CAFR footnote preparation if needed

Review your finance software for adequacy of canned system reports and make arrangements to compile and program a new report if needed

Use annual year-end letters and reminders to staff about your department’s overall schedule during year-end, and what types of rules you will have in place for processing checks at that time.

Ensure your actuary has all the needed data for the reports you will need at year-end; confirm when you will receive those reports

SUGGESTED STRATEGY MAXIMIZING TIMING OF DELIVERABLES (cont.): Sample Email to All Employees: Hello Everyone, Please be aware that Accounting will be closed

starting MM/DD/YYYY, and for the next three business days ending on MM/DD/YYYY in order to effectively transition to the FY2015-2016 in the Accounting system. If the system transition is completed earlier, then I will send out a notification earlier. Likewise if there are any system complications, then at that time I will also send out a notification.

See Handout for full email sample

SUGGESTED STRATEGY MAXIMIZING TIMING OF DELIVERABLES (cont.):2. Starting The First Week of the New Fiscal Year: Deal

with areas affecting the new fiscal year: Accounting system roll to new fiscal year; closing period

12 and opening period 1. Follow software instructions. Adding or modifying your chart of accounts to account

for budgeting changes; & De-activate old programs How many separate subledgers do you have for which

you will need to upload an updated chart of accounts? Do you have one for your purchase card system? Rec and Parks system? Building & Safety?

Carryovers … do you have a special data compilation and review/approval process?

Budgeting mistakes and oversights that need to be dealt with before entering new transactions into the accounting system

Determine when the Single Audit will take place

SUGGESTED STRATEGY MAXIMIZING TIMING OF DELIVERABLES (cont.)

3. Within the First Two Months After Year-End: Closing the Fourth Quarter

Target the following accounts first: Cash, including bank reconciliation, Debt, Interest Expense and Amortization. Then Receivables and Current Liability accounts. Then other long term liabilities, and long term assets. Then Deferred outflows and inflows. You may need to close fixed assets last depending on how soon your

vendors can get their invoices paid for last few months of work done during the fiscal year.

If you have the data and skill level available to close long term liability accounts earlier, then do so.

Meet with various departments for obtaining information of significant events or projects that occurred during the past fiscal year

If a financial report is needed earlier, you can always use reasonable estimates and mark your report as “Unaudited” if that is the case, or narrow down preparation to the specific account(s) being requested. If you have the option of asking for more time, then do so. This may be a time when you need to ask for more help.

SUGGESTED STRATEGY MAXIMIZING TIMING OF DELIVERABLES (cont.)4. By the end of the third month after fiscal year-

end: Prepare all audit requested worksheets, CAFR

preparation worksheets, and State Controller’s Report preparation worksheets

Ensure any new GASB pronouncements were applied properly

Ensure all comments/errors made on prior year CAFR have been addressed for the current year CAFR

Ensure Carryover process is completed and results communicated to all departments, if applicable

SUGGESTED STRATEGY MAXIMIZING TIMING OF DELIVERABLES (cont.)5. By the end of the Fourth month after

fiscal year-end: Submit State Controller’s report Prepare MD&A, Statistical section,

Transmittal letter, and any extra footnotes needed for CAFR

Close the First Quarter of the new fiscal year for which you are in. Close the General Fund first

SUGGESTED STRATEGY MAXIMIZING TIMING OF DELIVERABLES (cont.)6. By the end of the Fifth month after fiscal

year-end: Finalize CAFR-draft and expose for auditor

review Finalize and date CAFR Transmittal letter Follow Up on Single Audit progress and Report Implement final CAFR comments and submit to

granting agencies, and the State Controller’s office

Meet with your audit committee regarding Management letter comments, if applicable

WHAT DO YOU THINK ABOUT AT EACH STEP ALONG THE WAY?

WHAT DO YOU THINK ABOUT AT EACH STEP ALONG THE WAY? The Audit Financial Statement Preparation Regulatory Report Preparation (IE: the

State Controllers Report)

HOW CAN YOU STAY AHEAD OF THE AUDITORS? Read the minutes of the governing body and

record any transactions that may have been missed

Re-review your check register and revenue register amounts over a particular threshold for at least three months before and three months after your fiscal year end. Look for unrecorded assets and liabilities.

Meet with departmental staff to review any new endeavors they may have started or ended during the fiscal year to ensure you have recorded special projects or transactions properly in case you missed them during your own review.

ACCOUNTING SYSTEM PITFALLS No Accounting system is perfect and fully

understanding what your system is capable of is critical during year-end preparation.

Do other divisions such as budget, receivables, HR, payroll, purchasing, also understand this system since they may have modules of their own that require their own year end procedures.

Some accounting systems only allow you to print reports of balances the day of, and you cannot go back later and print them. I.E.: You may have to implement a rule for other staff not to

enter any more transactions into the receivable system at a certain point.

Are you making a backup of your accounting system regularly?

WILL THERE STILL BE MISSED AREAS? POSSIBLY: That’s why communication is key

Examples: Departments can apply for, receive and execute

grants under the radar, especially by those staff who have no idea that they need to be accountable for their spending.

There could be CIPs or bond issuances that have early exploratory costs that need to be tracked as well

QUESTIONS?